A credit card can be quite a valuable tool if it is used effectively but are you aware of easy and effective ways to manage your credit cards for your personal gain? Credit cards, if used, ineffectively, can lead to a world of harmful consequences. It, therefore, simply boils down to one question – Can you handle a credit card?, Which type of a credit card user are you? To answer these questions, you will need to evaluate yourself and your financial status as well as behavior. If you are facing trouble doing so, do not worry! By the end of this article, you will either know that a credit card is not for you, or know how to make the best use out of one. Continue reading to find out…
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Who are the ones who would find it difficult to handle a credit card?
Before we discuss how you can use your credit card in the most effective manner, let us know if credit cards are suitable for you at all. Usually, it is possible to put your credit card to good use just by following a few simple tips and tricks. However, if you are of a particular personality that would find it difficult to handle this financial tool, maybe this is not the right time for you to be getting a credit card. If you fall into one of the following personalities, then maybe you should reconsider using it:
- The lagger: This particular type of personality are not hard to spot in the crowd. They procrastinate till the end before paying their bills. Laggers are well known to cross their due date of bills. Therefore, if you are a lagger too, it is time to stop using your credit card, at least for the time being. You can start using a credit card again when you feel that you are at a point where you do not procrastinate anymore and will be able to pay your bills on time.
- The impulse buyer: The impulsive buyer as the name suggests are the ones who make their purchases in the heat of the moment, without any pre-planning or forethought. They are the most vulnerable of the lot. So, if any person belonging to this category gets his/her hands on a credit card, it will only be one more step towards even more impulsive purchases. As a result, it will only be a matter of time before this person falls into a load of debt that he/she may not be able to repay at all.
- The always broke: This is the type of person who does not think twice before spending. They are always broke because the concept of saving and planning is not present. With a credit card, such a person will only find a way of spending the money that he/she does not have in the very first place. Needless to say, repaying that amount of money is going to be extremely difficult, if not impossible.
- The ignorant lot: The lot who does not bother to try knowing and understanding the schedule changes and benefits that come with the credit card. They do not understand that a credit card comes with quite a few benefits and rewards, only if one knows how to use it in the right manner. Before getting a credit card, it is important to know that it is more than just a tool for spending before you pay.
- The college-goers: Though not all, but a majority of the college-goers are reckless and irresponsible. Thus, a credit card can become a huge liability for them. It is, hence, only viable that college students avoid getting a credit card for themselves.
Tips to follow if you wish to handle your credit card effectively
Now that we have already discussed the personalities who would not do well with a credit card at all, we should also keep in mind that simply owning a credit card is just not enough. You can only use a credit card for your personal gains if you manage it in the best possible manner. Let us know a few tips that will enable us to handle a credit card in the most effective manner. Here are some plans you can abide by to avoid making your credit card a liability:
Pay your credit card bill on time
Paying all of your bills on time is a great way to keep your interest rates low and improve your credit score. To avoid missing your due date, set a reminder on your phone a few days beforehand or mark the date on your calendar. You can also adjust your online account settings so your bill is paid automatically on a certain day of the month through a direct bank draft.
Pay your bill in full every month
It’s often mistakenly believed that making the minimum payment on your card dues is sufficient. To avoid penalties, you must pay your bill on time. But to avoid heavy interest rates, you must also pay the bill in full. Don’t pay attention to the minimum dues, and make it a point to clear your full card balance every month.
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Know your limits
If you’re worried that you might overspend, ask your credit card company to lower your credit limit to something you know you can manage on a monthly basis. They should be more than happy to oblige since they ultimately want you to pay the money back, and they can often make the credit limit change effective immediately.
Only use your card for the big purchases
Sometimes, the little $10 and $20 purchases can, over time, build up to a huge credit card debt when left unchecked. Consider using your card just for big purchases instead. The best way to do this is to save up for your purchase in cash first. Then, after you make the big purchase with your credit card (and reap the rewards points), you’ll have the funds to pay it off right away.
Avoid cash withdrawals
One should always remember that credit cards are not debit cards. The cash withdrawal charges for credit cards are very steep. This has the potential to burn a hole in your pocket. Therefore, if you can, avoid cash withdrawals from your credit card completely.
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These were some basic tips that every credit card owner should follow. Credit cards are and can remain a substantiated source of finance, provided you maintain a healthy relationship with it. Credit cards in UAE are a necessity in many ways. They score over debit cards because of the reward points as well as the ease of conducting transactions even during a financial crunch.
Therefore, it is always advisable to understand your card’s fee structure, rewards, interest rates, and penalties. Also, make sure that you do your research well and compare various cards to determine the best one for yourself and your lifestyle. There are a number of banks providing credit cards in UAE with offers for various specific activities such as dining, shopping, and traveling. Make sure you are well aware of your lifestyle as well as spending habits and opt for a card that best compliments them.